West Sacramento, CA-Group Health Insurance, Patient Protection Act and Affordable Care Act.


President Obama signed into law on March 23, 2010 HR 3590 and a follow up reconciliation bill, HR 4872 on March 29, 2010. These measures are the most sweeping reform of the health insurance system in the history of the United States. Together, the legislation contains over 2,700 pages of language and will require regulatory guidance from Federal and State agencies.  This is also referred to as the Patient Protection and Affordable Care Act (PPACA).

There are a number of positive provisions of the legislation which will help consumers gain access to health insurance coverage. At the same time, there are also provisions which we believe may increase the cost of coverage for both individuals and businesses in future years (we have highlighted these in RED). You should expect that the rules and regulations applicable to this law will be generated over the next seven to ten years.

This pamphlet is an attempt to provide clients with some basic idea of what is in the law and when it will be implemented. It is a very high level look at the legislation and is not intended to provide legal or accounting advice.

In 2010

?Enacts the 1st phase of a small business premium tax credit if they pay for at least 50% of the cost of coverage for employees;

?Within 6 months of becoming law:

?Prohibit lifetime benefit limitations on ALL health insurance plans;

?Require ALL plans to cover dependents up to age 26 regardless of marital or educational status;

?Prohibit coverage rescissions except in cases of fraud or intentional misrepresentation (already enacted in California);

?Require ALL plans to cover pre-existing conditions for children under age 19;

?Require ALL group plans comply with non-discrimination rules which prohibit favoring highly compensated employees;

?Creation of a “high-risk” pool for people who cannot obtain insurance due to a pre-existing condition (already exists in California);

?The Dept. of Health and Human Services (DHHS) will create an internet portal by July 1, 2010 to provide information on public/private health insurance options (already exists in California);

?Requires that emergency services be covered as an in-network benefit, regardless of provider, and that any network doctor may be designated as a primary care physician (PCP);

?Implements a Federal grant program for small employers to provide a wellness program;

?Requires that specific preventive services no longer have a cost sharing provision (deductibles, copayments, etc.), and specifies certain minimum covered preventative care services for ALL health plans;

?Enacts Federal oversight of health insurance premium rates (formerly handled exclusively by the States);

?Enacts a minimum loss ratio rule for health insurers which in turn requires a premium rebate to individuals if insurers fail to meet that requirement.

In 2011

?Increases the tax on non-qualified distributions from an H.S.A. from 10% to 20%;

?Over-The-Counter (OTC) drugs are no longer reimbursable under an H.S.A., F.S.A. or H.R.A. unless specifically prescribed by a physician;

?Creates a new public Long Term Care program and requires all employers to enroll employees unless the employee elects to opt out.

In 2012

?Implements a $2.00 per enrollee tax to fund Federal comparative effectiveness research;

?Employers must include the aggregate cost of employer-sponsored health benefits on an Employee’s annual W-2 form;

?Employers and Insurers must provide enrollees with a summary of benefits/coverage explanation at various times or be fined $1,000 for willful failure to do so.

In 2013

?Implements an additional 0.9% Medicare Hospital Insurance tax on self employed individuals and employees with respect to earnings and wages above $200,000 for individuals ($250,000 for joint filers):

?Self employed individuals are not permitted to deduct any portion of the additional tax;

?Implements a new 3.8% Medicare contribution on certain unearned income from individuals with Adjusted Gross Income (AGI) over $200,000 ($250,000 for joints filers);

?Increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5% to 10% of AGI for regular tax purposes;

?Places an indexed cap of $2,500 on contributions into a Medical Flexible Spending Account (FSA).

In 2014

?Implements an annual tax on private health insurers based on net premiums (in addition to any State premium or other taxes they now pay);

?All health insurance coverage must be “guaranteed issue” and “guaranteed renewable” for all persons;

?All exclusions for pre-existing conditions will be prohibited in all markets;

?Implements a full prohibition of any annual limits or lifetime limits in all group and individual plans (including self funded plans);

?Requires that all Individual and Small Group plans (1-100 employees) use a community rating system which prohibits experience rating, and permits price variations for age (3:1 ratio), tobacco use (1.5:1 ratio), family composition and geographic regions;

?Requires that each State creates a Health Insurance Exchange to facilitate the sale of qualified plans to individuals:

?States must also create “SHOP Exchanges” for small businesses to purchase coverage (large employers may join in 2017);

?Enacts an “Employer Responsibility” provision for companies who employ more than 50 full time employees – they must provide benefits:

?Must meet an “essential benefit” requirement;

?Must pay at least 60% of the “actuarial value” of the cost of coverage;

?Fine of $2,000 per non-covered employee (waived on the first 30 employees) if non-compliant;

?Alternative fine of $3,000 per FTE receiving a premium assistance tax credit or $750 per employee;

?Implements a Premium Assistance Tax Credit for employees who contribute more than 9.5% of income for cost of coverage or if employers contribution is less than 60% of “actuarial value”;

?Prohibits waiting periods of more than 90 days to obtain coverage in a group insurance plan;

?Requires Employers to provide a voucher to employees to use to purchase individual coverage if a group plan is not available;

?Enacts an “Individual Mandate” whereby all Citizens and Legal Residents must purchase qualified health insurance with some exceptions:

?Penalty for non-compliance either flat $ amount or % of income, capped at “Bronze Level” Exchange plan;

?Implements a sliding scale tax credit for non-Medicaid individuals with incomes up to 400% of FPL to buy coverage through an Exchange.

Beyond 2014

?In 2018 enacts a 40% excise tax on insurers of employer sponsored plans with aggregate values that exceed $10,200/single or $27,500/family.